Poindexter Expected to Resign in Futures Market Controversy

John M. Poindexter, the clever but politically lead-footed progenitor of the terrorism futures market project -- canceled by the Pentagon this week after it was made public -- will resign as a result of the controversy, a senior Defense Department official said Thursday.

The futures market, known as FutureMAP, was a pet project of the Defense Advanced Research Projects Agency, or DARPA, a futuristic unit of the Pentagon. The program, in which investors would have effectively bet on the likelihood of terrorist attacks and other turmoil around the world, sank in an onslaught of criticism as soon as members of Congress learned of it.

The senior official, who spoke on condition of anonymity, said that Poindexter, head of DARPA’s Information Awareness Office, had decided to resign in the next few weeks because he felt he had become a lightning rod for criticism, detracting from the work of the Defense Department.

“We’ve had a couple of programs of varying degrees of merit that have been seen as certainly unorthodox, different in terms of the nature of the research being done. It’s cutting-edge and beyond that in some cases perhaps,” the official said. “Given the circumstances

The official said that Defense Secretary Donald H. Rumsfeld did not ask for Poindexter’s resignation but understood why the retired rear admiral felt it was necessary to offer it.

The official said Poindexter, 66, planned to take several weeks before formally submitting his resignation. “There are circumstances to work through and he’s got his own conditions to manage and we’re letting him do that,” the official said. He declined to elaborate.

According to DARPA, the futures market project was designed to cull wisdom about the likelihood of terrorist attacks, assassinations or other mayhem. But critics said it was perverse to profit on such information, especially because terrorists could conceivably use the market to make money off of their own actions.

Poindexter, a former national security advisor to President Ronald Reagan, was a central figure in the Iran-Contra scandal of the mid-1980s, accused of running an off-the-books foreign policy from inside the White House, in which arms were sold to Iran in return for the release of Americans held hostage in Lebanon. When Congress cut off funding for the right-wing Nicaraguan guerrillas known as the “Contras,” Poindexter helped divert some of the arms sales proceeds to the fighters.

Poindexter was convicted on five counts in connection with a congressional investigation into the affair, although the conviction was overturned on appeal.

“He is undoubtedly the only national security advisor in American history who has ever had a Tom Clancy novel written in which he was the villain,” said Thomas S. Blanton, director of the National Security Archive, an independent research institute that collects and publishes declassified documents.

Blanton described Poindexter as a brilliant “out-of-the-box” thinker who, like many visionaries, often finds himself beyond the edge of public acceptance.

“Visionaries are almost always tone-deaf. If you are alert to tone and pitch, it tends to move you to the center,” said Blanton.

Poindexter has a doctorate in nuclear physics from Caltech. A Caltech professor, economist John O. Ledyard, was a partner in the FutureMAP project through his San Diego company, Net Exchange. The third partner was the Economist Intelligence Unit, the research arm of the Economist magazine.

The terrorism futures market was the second major DARPA project to generate controversy. The earlier Total Awareness Program, designed to sift through mountains of e-mail and other computer communications looking for hints of terrorist activity, was scaled back as a result of similar criticism and renamed Terrorism Information Awareness, or TIA.

Sen. Barbara Boxer (D-Calif.) called Poindexter’s expected resignation “appropriate.”

“The Pentagon wasted hundreds of thousands of dollars on this program, and was poised to waste millions more if members of Congress hadn’t learned of it and objected,” Boxer said. “This sick idea should never have moved forward at all.”

Democratic Sens. Ron Wyden of Oregon and Byron L. Dorgan of North Dakota, who brought the FutureMAP project to light this week, said the Bush administration should do more than simply accept Poindexter’s resignation.

“Even with today’s announcement, the proposed TIA program would still be the biggest spying and surveillance overreach in America’s history, and it should be shut down,” the senators said in a statement. “Congress will have the opportunity to do just that in the conference for the defense appropriations bill in the fall, and we hope to see this program de-funded once and for all. We have always believed that it is possible to fight terrorism vigorously without gutting civil liberties. The TIA program skews that balance and needs to go.”

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Times staff writer Esther Schrader contributed to this report.